Paint Distributor: Eartham Distributors (The Operating Plan)
The Operating Plan
The Company plans to keep a ratio of about 80% small users (under 300 gallons per month of coating) to 20% large users (over 300 gallons per month). This ratio will provide more stability over a number of years, in case of market fluctuation for the customer and turnover of customers. The Company, however, will be selective in its large customers in order to:
- Provide maximum growth for The Company & Cather.
- Select the most profitable customers while competition between representatives is low.
- Take advantage of the products most environmentally in demand.
- Optimize travel within a region.
- Selectively offer franchises and dealerships to companies or individuals who have the market position, personnel and capital to service specific markets and move substantial quantities of The Company's products. An example is franchising automotive specialty product distribution.
Initially, The Company expects little or no competition in its paint offerings, because of the technological advantage of the Cather products. The Company expects to maintain a leadership role for the envisioned future with its ceramic coatings offerings because Cather products in this area are well protected. Thus, an emphasis will be placed on ceramic customers after competition surfaces for the paint line.
The Company will receive distributor pricing, plus a 10% commission on sales for all products sold off the normal OEM pricing schedule to major users (200 gallons per month or more). Very large OEM quantities are usually negotiated and The Company will work out pricing and compensation with the factory in those cases on a direct ship basis. However, generally Cather intends to provide the stocking function for the area of operation of The Company. A small stock will be employed initially, then the company will build larger inventories as cashflow permits.
In the second, and successive years of operation, The Company plans to open industrial paint outlets (stores) in the major cities within the assigned Sales Territory. The Company's earnings will be re-invested to this aim for the first two years to self-finance the opening of outlets and gain associated hard assets. However, a block of common stock shall be reserved for future capital expansion requirements if market growth requires. The potential is high for adding significant long-term future assets, if the stores capture even a small percentage of the commercial-industrial contract painting market.
The Company needs to have excellent computer resources to communicate with Cather, company sales force and distribution outlets. The Company plans to use a network to include use of notebook computers and new mobile data networks to keep in communications, even in customers' facilities. The Company intends to maximize use to management tools to insure control while allowing for the delegation of authority needed to expand rapidly.
Messieurs Fischer and Won plan to travel approximately three to four days a week for the first one to two years, establishing accounts, opening additional stores and supervising sales representatives. The Company will initially employ part-time bookkeeping and clerical staff. Expansion will occur first in the hiring of additional sales reps and a person to man the Petersburg store. When the Petersburg outlet begins turning a steady profit, second and successive stores will be opened.
Expansion of stores will be initially planned to cover the major metropolitan areas in the territory. Then, expansion to fill in voids will begin. The Company expects to have between 12 to 15 outlets within three years.
Financial Projections and Assumptions
